Fannie Mae to the Rescue!

Fannie Mae has just announced another initiative to aid in recovery from the subprime mortgage crisis. This initiative will be fairly limited in scope but will address a group of homeowners that haven’t received much help to date. The new program aims to assist homeowners that are upside down on their homes, or in other words those that owe more on their mortgage than their home is currently worth. Without this recent announcement, some of these homeowners would be forced to bring money to the closing table in order to refinance their existing mortgage or sell their home given the current market conditions.

The Nuts and Bolts of the Program

There are clearly benefits in this program for both homeowners and Fannie Mae. Under it, homeowners will not be forgiven of any debt but will have the opportunity to refinance at a mortgage balance of up to 120% of the value of the home. This may result in relief to the homeowner by reducing interest rates, converting an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM), and/or extending the repayment term. Fannie Mae is banking on the idea that this will help homeowners avoid falling behind on their mortgage and buy them some time to allow home values to stabilize and begin appreciating again. The benefit for Fannie Mae is that by keeping these mortgages current, they can avoid or postpone writing down further losses associated with delinquent mortgages.

What does it take to qualify?

Again, this program will allow for loan-to-value ratios of up to 120%. The major stipulation is that the mortgage must be paid current and Fannie Mae must either own or insure the mortgage.

FHA Secure vs. New Fannie Program

So what is the difference between this program and FHA Secure? FHA Secure is an excellent program that allows homeowners that are current or delinquent on their ARM to refinance. If the borrower is delinquent, they must show proof that the delinquency was caused by an increase in mortgage payments caused by the reset of an ARM. The borrower may have an FHA or non - FHA mortgage and still be eligible for refinance. However, the current mortgage must be an ARM. With Fannie Mae’s new initiative, the borrower may have an ARM or FRM but they must be current and must have a Fannie Mae owned or insured mortgage. Both programs do require borrowers to meet traditional underwriting guidelines for income, assets, employment, etc.

To learn more about this program, click on the red drop down banner at the top right corner of the http://www.noblelenders.com homepage.